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2. Tax Deductions Under Section 10 (10D) of the Income Tax Act
For insurance policies that were issued after April 1st, 2012, tax exemptions are applicable in cases where the total premiums paid don’t exceed 10% of the sum assured
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Life Insurance Tax Benefits Under the Income Tax Act, 1961
Section 10(10D): Section 10(10D) of the Income-tax Act, 1961 pertains to benefits received under a life insurance policy. The exemption applicable, under both the old and new tax regimes, applies provided the premium paid does not exceed 10% of the sum assured (for policies issued after 1 April 2012), or 20% of the sum assured (for policies issued before 1 April 2012). Any amount received under this Section, including bonuses, is completely exempt from taxation. Additionally, this benefit could be a death benefit, a maturity benefit, or even the benefit received upon surrendering the policy. However, if you choose to surrender your insurance policy, there are a few other things you should keep in mind. For a single premium policy, the surrender benefit is exempted from taxation only if the policy is surrendered after the completion of 2 years. With a regular premium policy, you are eligible for tax exemption on the surrender benefit only if the premiums have been paid for at least 2 years. If you have opted for a Unit Linked Insurance Plan (ULIP), you can only surrender the policy after the 5-year lock-in period has been completed to receive the tax benefits.